* Dollar gives back early gains after G20 draft communique
* Sterling on backfoot, falling below key $1.60 support
* Fed Governor Warsh talks of eventual policy normalisation
By Rika Otsuka
TOKYO, Sept 25 (Reuters) - The dollar slipped on Friday after
a draft statement showed leaders of the Group of 20 rich and
developing nations pledged to sustain emergency measures until
the economic recovery becomes solid, encouraging speculators to
sell the low-yielding greenback.
"The statement was taken as a sign that conditions for dollar
carry trades will remain intact, sparking some dollar selling,"
said a forex trader at a big Japanese bank. []
The U.S. currency rallied broadly earlier after the Federal
Reserve and other major central banks the previous day jointly
announced steps to scale back massive injections of the dollar.
[]
Early dollar buying was further boosted by comments from Fed
Board Governor Kevin Warsh that the U.S. central bank may have to
raise interest rates from near zero percent before the need to
take action is obvious. []
Sterling slid further to a four-month low against the dollar
as a break of major support levels triggered a wave of stop-loss
sales.
The dollar index <.DXY> was down 0.2 percent at 76.719, after
rising over 1 percent on Thursday.
The euro edged up 0.2 percent to $1.4690 after falling as low
as $1.4614 earlier in the day. The European currency hit a
one-year peak of $1.4845 on Wednesday on trading platform EBS.
Traders said Asian central banks had been buyers around
$1.4620, putting a floor above Monday's lows around $1.4610.
Hideaki Amikura, deputy general manager of the forex division
at Nomura Trust Bank, said the move by central banks may have
been aimed at cooling asset bubbles seen emerging in commodities
and global stocks encouraged by easy monetary policy around the
world.
Higher-yielding currencies such as the Australian and New
Zeland dollars also recovered losses against the greenback after
the draft G20 communique.
The Aussie rose 0.4 percent to $0.8691 <AUD=D4>, crawling
back towards a 13-month peak of $0.8790 reached earlier this
week.
STERLING DIPS BELOW KEY $1.60
Sterling was hammered after Bank of England chief Mervyn King
said a weak currency was helping the domestic economy, which was
taken as a green light for speculators to sell it. []
The pound extended its slide on Friday, falling below major
support at $1.60 <GBP=>. It dropped as low as $1.5917, its lowest
since early June, before edging back to $1.5989, down 0.4 percent
on the day.
The UK currency also sank against the euro <EURGBP=D4>, which
rose more than 0.6 percent on the day to 91.93 pence, its highest
since early April.
The dollar fell 0.8 percent against the yen to 90.57 yen
<JPY=> as the Japanese currency rose broadly, helped partly by
its sharp gains versus the pound.
Some Japanese exporters sold dollars as the country's
financial half-year ends on Sept. 30, while Japanese
institutional investors and overseas hedge funds took profits on
a rally in cross/yen in the past few months before the
quarter-end, traders said.
Against the yen, the euro shed 0.6 percent to 133.02 yen
<EURJPY=R>. Analysts said investors cut long euro positions
versus the yen, which tended to rise when the market was
confident about global growth prospects.
(Additional reporting by Wayne Cole in Sydney and Satomi Noguchi
in Tokyo; Editing by Joseph Radford)
